Consolidation: GBP/USD entered the week in a consolidation, bullish correction mode. Last week, cable had formed a price bottom between roughly 1.6052 and 1.6155. After a break above this double bottom, price rallied to 1.6277. The 1H RSI shows loss of bearish momentum, but price still held below the 200-hour simple moving average (SMA) for the most part. This showed lack of bullish strength.
(click to enlarge)
Turning Bearish: As we get in the 9/16 European session, we are seeing price shift back into a bearish mode, or at least attempting to do so.
– Price is breaking below a consolidation range for the past few sessions as it moved below 1.62.
– Price is staying south of the 200-, 100-, and 50-hour SMAs.
– The 1H RSI dipped below 30 to show new bearish momentum.
Support, Pullback: Now, the next challenge is around 1.6150, which was around the highs from last week’s price bottom. At this point, if price pulls back up, a bearish market should hold price below 1.6225 for the most part, and the 1H RSI should hold below 60. A break above 1.6250, with the 1H RSI back above 60 would show weakness of the bearish attempt and loss of bearish momentum, in which case GBP/USD would be sideways to bullish in the short-term.
When we look at the 4H chart, we can see that the integrity of the medium-term bearish trend is still intact.
– The 200-, 100-, and 50-period SMAs are sloping down, in bearish alignment, and spreading apart, with price trading below them.
– The 4H RSI held below 60, showing maintenance of the bearish momentum in this time-frame.
The GBP/USD in the 4H chart looks poised to test the 1.6051 low. If however, we have the situation where price returns above 1.6250, cable would have upside risk first back to last week’s highs around 1.6277, then the 100-period SMA in the 4H chart around 1.64.
This Wednesday, GBP/USD will likely be volatile amid a Scottish independence vote, and the FOMC monetary policy decision followed by Janet Yellen’s press conference. For now, the market looks like it has bearish anticipation of these risk events.
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